Van Beeber Corporation's comparative balance sheet and income statement for last year appear below: The company declared and paid $49,000 in cash dividends during the year. It did not sell or retire any property, plant, and equipment during the year. The company uses the direct method to determine the net cash provided by operating activities. On the statement of cash flows, the sales adjusted to a cash basis would be:
A)$700,000
B)$688,000
C)$677,000
D)$712,000

Question

Van Beeber Corporation's comparative balance sheet and income statement for last year appear below:   The company declared and paid $49,000 in cash dividends during the year. It did not sell or retire any property, plant, and equipment during the year. The company uses the direct method to determine the net cash provided by operating activities. On the statement of cash flows, the sales adjusted to a cash basis would be:
A)$700,000 
B)$688,000 
C)$677,000 
D)$712,000

Quizplus · Accepted Answer

To determine the sales adjusted to a cash basis, we need to use the following formula:

Sales on accrual basis - increase in accounts receivable + decrease in accounts receivable = Sales on cash basis

Using the information from the balance sheets, we can determine that accounts receivable increased by $22,000 ($110,000 - $88,000).

Using the information from the income statement, we can determine that sales on an accrual basis were $700,000.

Using these values in the formula, we get:

$700,000 - $22,000 = $678,000

Therefore, the correct answer is B) $688,000 (rounded to the nearest thousand).

Van Beeber Corporation's Comparative Balance Sheet and Income Statement for Last